When buying a car, both immediate and long-term costs complicate the process of calculating how much you can safely spend. To afford your dream car, create a personalized, tangible budget, and stick to it as you go through the Mazda finance process.
Credit Score and Vehicle Affordability
If you pay for your car using a loan, your credit score will determine the interest rate set by either us or your bank. Your credit score is inversely proportional to your loan’s interest rate, so your interest rate lowers as your credit score rises. Your credit score may also impact your loan term because your owed interest increases as the loan term lengthens.
Other Fees
You will also pay multiple fees, from us and the state. We charge a fee for delivering your car to our dealership, for instance. The state adds sales tax, a registration fee, and the cost of a new license plate. You must also account for ongoing expenses, like planned maintenance, emergency repairs, and fuel costs.
Factoring in Your Income
If you take out a car loan, your payment plan will differ from budgeting when paying with cash.
When taking out a loan, follow the 20/4/10 rule. It states that on a four-year car loan, make a down payment worth 20 percent of the car’s price, and monthly expenses worth no more than 10 percent of your monthly income. Depending on your cost of living, you may make payments as high as 15 percent instead.
When paying with cash, compare the car’s price to your yearly income, and pay no more than 35 percent of your yearly income.
Consult with Experts
To receive advice on how to pay for your next car or to determine your eligibility for car loans, visit our finance department at Sentry West Mazda.
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